SMALL-SCALE chrome miners have engaged the Mineral Marketing Corporation of Zimbabwe (MMCZ) to adopt a market-based pricing system to cut out losses and nurse the sector back to viability.
BY MTHANDAZO NYONI
Small-scale producers export chrome through Apple Bridge Investments (Apple Bridge), a special purpose vehicle established by MMCZ to play the role of selling agent.
Some of the producers visited the NewsDay office in Bulawayo to voice their grievances over pricing issues. They said Apple Bridge used a pricing system based on prior-contracts, which do not take into account current market prices.
Based on the principle of prior negotiation, the system constricted prices within a band prescribed by the buyer, which keeps prices depressed.
Chrome producers, who claim that they have been forced to sell a tonne of ore at $20, had recommended the adoption of a market-based pricing system, which responds to changes in world market prices.
“Buyers are told what the price is and there are no negotiations, effectively turning them away. Buyers who attempt to negotiate the price in the form of written counter offer letters are not responded to. Some of them end up giving up and leaving Zimbabwe,” said the miners.
“Note that each buyer approaches Zimbabwe with multi-million dollar offers in foreign currency. The treatment they get might lead them to believe Zimbabwe is not open for business, or that nothing in Zimbabwe has changed.
“Those miners who have brought forward buyers continue to be turned away due to MMCZ unwillingness to negotiate market-based prices. All of this is occurring despite the announcement of a price steering committee.”
The miners also said pricing-related viability challenges made it difficult to pay annual rental fees for their special grants “as they continue(d) to make losses waiting for buyers while supplying predatory buyers at less than a quarter of the international market”.
“Chrome miners desperately need help from the incumbent (Mines) minister to realign MMCZ policies to open up Zimbabwean chrome exports and bring in the foreign currency needed to sustain and grow mining operations. Miners have been pushing for reforms for over two years regarding MMCZ pricing structures,” the miners said.
In response to miners’ concerns, MMCZ corporate communications executive, Pretty Musonza said the country’s sole minerals marketing and selling agent except for gold and silver had set up a pricing consultative committee on chrome ore to deal with the issue.
Comprising the Zimbabwe Miners Federation (ZMF), MMCZ, Apple Bridge and small-scale producers of lumpy and concentrate, the committee is responsible for setting a minimum price threshold below which exports cannot take place.
Musonza explained that the actual export price determination took into account issues such as the minimum guideline agreed by the committee; the most recent achieved prices; market fundamentals; historical market performance; prospective customer offers and counters; volume; the quality requirements; relevant deductible costs and application of the product by the end user.
“The agreed and adopted prices by the committee are also used by producers as a guide for negotiations for local sales to the smelters. It should therefore be noted that, as indicated above, the Corporation considers a number of applicable factors in coming up with the export price,” Musonza said.
“MMCZ at all times strives to maximise returns to the producers by ensuring that the export price is not below the production costs and that it is line with market dictates. Thus, increasing export revenue to both the producers and the nation at large.”
She said MMCZ had been following the cost insurance and freight (CIF) China pricing model to the satisfaction of producers and major investors in the chrome ore sector.
“It is, however, noteworthy that the corporation faces challenges from a few minor middlemen or traders who are bent on externalising foreign currency earnings through transfer pricing,” she said.
“The country in the first half of the year lost potential earnings in excess of $70 million by exporting raw chrome and cannot further lose foreign currency earnings through under-invoicing chrome ore.”
She also said MMCZ was mainly formed to minimise opportunities for underhand dealings such as transfer pricing, under invoicing and related problems.